cost and residual value are keys to
Leasing isn't a cheap and quick way
to get a car. It makes sense for some consumers, but for others, it
is a money trap.
Leasing a vehicle became popular
during the 1990's, causing many people leasing headaches after a few
years when they found that they would be responsible for mileage
overruns and damage to the vehicle.
Leasing is ideal for you is you want
the latest make of a vehicle, you drive less than 15,000 miles a
year and you are very meticulous with the care of the car. Leasing
offers you in return lower monthly payments and allows a you the
opportunity to drive a more expensive car.
The keys to getting a good deal are
knowledge and strategy.
Ignorance of the terminology or the
basics is the main reason you will pay too much for a lease. In
Florida, the state attorney general's office has identified 40 types
of leasing fraud. If you don't know what you are looking at, you may
be a victim.
Being uninformed can cost you as much
Keep in mind that often drivers pay
thousands of dollars more to lease a car that they wanted to buy.
These buyers are often talked into a lease without understanding how
Leasing gives a dealer more places to
negotiate than buying does. Make sure that you both agree on each
detail along the way. You must know what you are paying, when and
for what before you sign the lease.
A lease is basically the payment of
the difference of the new car value of the vehicle and the amount
the vehicle will be worth at the end of the lease, also called the
residual value. Call the bank or dealer to find out a car's residual
value. Most cars will have a value of 50% to 58% for a 3 year lease.
The capitalized cost is what must be
negotiated. The dealer often simply looks to the MSRP or sticker
price. You don't have to accept that. You can negotiate down the
MRSP in a purchase, and you can negotiate it down in a lease.
The capitalized cost should be
reduced by your trade-in, down payment or any manufacturer's
rebates. It will be increased if you trade in a car that you owe a
balance on or if you have to pay lease acquisition fees.
Often, a dealer will set the
capitalized cost higher than the MSRP - so watch out. This often
happens when you are trying to lease a vehicle that sells well. If
you see that the capitalized cost is higher than the sticker,
rethink the situation.
You should also use the capitalized
cost to shop around for lease deals from other dealers.
There are a lot of numbers to figure,
just like when you are buying a vehicle. Having no down payment is
fine, and it is usually balanced out in the costs somewhere else in
the lease. If you can negotiate your way to a down payment and a
shorter lease length and a better mileage allowance, you are doing
Your lease will give you the option
of buying the vehicle when the lease expires. Have the costs written
into your lease. That figure, plus your total lease costs over the
years, will tell you what you are paying to buy the car in three
years. Hopefully it is less than just buying the car now.
Before you lease, decide if you will
buy the vehicle at the end of the lease. Go ahead and figure out
what the payments will be and how much you will owe. If the figure
is crazy, you probably aren't looking at the best deal.
Look and read every single word and
number. Make sure everything adds up and that you understand every
detail - before you